on top of US$4.5B budget surplus and their income tax rate is only 20%. In contrast, we are giving out rebates on top of record deficit?! No wonder legendary investor Jim Rogers have already moved there. http://online.wsj.com/article/SB120329990092874587.html?mod=googlenews_wsj Singapore Budget Tackles Inflation By P.R. VENKAT and JOHN JANNARONE February 18, 2008 SINGAPORE -- Singapore announced a new budget Friday offering a host of measures to shield low-income groups from the highest inflation to hit the island in 25 years. A surge in consumer prices prompted Singapore's central bank to tighten policy in October, but the government is wary of an excessive appreciation of the currency. "There is a limit to how fast the Singapore dollar can appreciate without hurting our economic performance and growth," Minister for Finance Tharman Shanmugaratnam told Parliament. "An overly strong Singapore dollar can bring inflation down, but at the cost of lower growth and higher unemployment." The island's central bank uses the exchange rate as a policy tool and in October said it would set the currency on a "slightly" steeper appreciation path. Setting monetary tools aside, the government has offered a budget that addresses inflation's social costs through tax rebates and incentives for residents to save. But the spending plans signal a fiscal boost that may complicate the central bank's position at its next review in April. "We would have thought that the case for a net tightening of domestic fiscal conditions was fairly strong," said Robert Prior-Wandesforde, an economist at HSBC in Singapore. "But this is clearly not the route the government has taken." Mr. Tharman said Singapore will post a budget surplus of 6.4 billion Singapore dollars (US$4.5 billion) for the year ended March 31, but next fiscal year's spending plans led it to project a deficit of S$0.8 billion for the following 12 months. The government announced a 20% income-tax rebate with a cap at 2,000 Singapore dollars per resident. The rebates are expected to cost 380 million Singapore dollars. Other initiatives include tax breaks on money deposited in the government savings scheme and supplementary payments to low-income workers. To keep inflation in check, the government will withdraw about 1 billion Singapore dollars in planned construction projects after pulling S$2 billion from the pipeline last year. Singapore raised its official 2008 inflation forecast Thursday to 4.5%-5.5% from a previous range of 3.5%-4.5%. Singapore won't lower its personal or corporate taxes this year, but the government won't rule out cutting levies in the future to remain competitive. Among new incentives to draw foreign firms to Singapore, Mr. Tharman said the government will offer a 5% tax break for businesses engaging in Islamic finance.
The US giving that rebate check had to be done. Singapore can thank the US for that, actually, since keeping the US out of a recession is very much in the world economy's interest
The rebate check is one of the dumbest things I've heard of in a long time. It will do absolutely nothing for the middle and lower class. The best part about it is that we get to finance the entire debacle! Woo hoo, just what we need, more debt. Good job America!
Wrong. It will assuredly stimulate consumer spending across the board, especially the middle and lower class since they're the ones actually receiving the checks! Do a little research. HTIA (Heartfelt TIA)
Well, we are printing money to finance this. So all US$ holders will suffer from the depreciation that follows. Since upper class is more likely to hold foreign currencies or tangible assets, it follows that middle and lower class will suffer the most.
lol yeah the upper middle class is investing huge in the forex markets. Right. You guys are really stretching here. China is happy to finance our spending, anyhow since we buy their goods.
That couple of hundred dollars is going to really make a huge difference. I can see how it will drastically change peoples lives. It definitely makes sense to go into more debt to stimulate the economy in this way. For someone that is such an economy whiz, you seem to have zero common sense.
Well, the majority of dollars is still held by Americans. Also, Japan actually has way more T-bills than China ever has. http://www.treas.gov/tic/mfh.txt
Jim Rogers can suck it. The guy likes to take out huge short positions against the dollar and other american investments then he goes on TV telling everybody what a terrible investment the dollar is and that everyone should sell dollars. If Jim Rogers was actually as concerned about the state of the American economy as he pretended - he would sell his place in Singapore and buy a huge place here - the guy already has more money than he could ever spend. He's not in any danger of going hungry. His alarmism is born of simple greed and avarice and should be taken with a grain of salt.
That is very true. The Singaporeans know that if the US tanks they are going to take a hit so they buy up US bonds to help fund the US economy. What should worry us here in America is that the Singaporeans are very aware that continuing to float the US indefinately isn't a good strategy and just mask indemic weaknesses in the US economy. The Singaporean long term strategy is to look to the PRC economy to eventually get as powerful as the US economy and then concentrate on trade with the PRC and move away from dealing with the US. As far as the Singapore rebate scheme this is something new for Singapore and one that I hadn't expected from them. The Singaporean government has previously encouraged consumer spending but has also been very concerned that Singaporeans save. The government savings system (CPF) has essentially been a mandated way of forcing them to save while also controlling the money supply. I find it interesting that they would now actually resort to giving money to the citizens to spend rather than adjusting the CPF to free up more money. I'm guessing that the weakness of the US dollar is keeping them from apreciating their currency more while they don't wan't to relax the CPF too much to keep the Singaporeans saving.
Also, I couldn't care less if it had bipartisan support. Stupid is as stupid does. This was a horrible, horrible idea and will do zero for the economy. I'm sorry I don't take comfort in the fact that you believe it will. You are the same person that has been telling us for years how strong our economy is and how everyone else is stupid for thinking for whatever reason you spout at the time. Now we are on the brink of recession and even you admit that.
Our economy has been very robust over the last few years. Even in 2008 we're expected to grow by 1.8%, which is not fantastic, but it's still solid growth. You have to put things in perspective. What you fail to comprehend is the impact on the economy of consumer spending versus additional US debt. If we have countries who are willing to finance our debt, we're ok. Over time we need to balance the budget and reduce some of our trade deficits, but we have time to do that before countries decide to quit funding us. There's really no other viable economic superpower that's a safer place for cash than the US is (from a foreign investment point of view), although over time I feel that China will continue to grow and stabilize (with a lot of bumps along the way).
^ people said that the decoupling of asian and european economies from the US was going to start this year, and/or had already started. Anybody with substantial investments in overseas assets can tell you that this is a complete myth - europe & asian markets have taken an even bigger hit than the S&P/DJIA this year
Yeah. From the link I provided, among major economies, only Japan reduced its T-bills holding about 5%. Interestingly, UK and Brazil doubled their holdings. The overall holdings is quite steady though
You're correct, Samf. I closely follow the emerging markets, Europe and the US equity markets, since I have investments in all three places. They are not yet decoupled, at all....especially the Asian markets. The Asians markets get pummeled the day after the US markets are down. If you're looking for a decoupled investment, look at GAF - it's an ETF that focuses on the Middle East and Africa. I have recently established a position there.
It's sort of counterintuitive, true. But it's kind of traditional Keynesian policy- deficit spending in slow economic times and surpluses in strong economic times. Of course, it's not perfect. The deficit spending forces the government to borrow, which increases interest rates and makes investment more expensive. Plus, you start to have a problem if you have several years of high unemployment and deficits in a row. Also, because of the delays involved in analyzing economic growth and implementing policies, there's some question whether such policies are actually counter-cyclical or whether they take effect so late that the situation's already changed. This isn't to defend Bush's policies, of which I'm always a little leery. Just saying that running a deficit during slow times isn't necessarily that strange of a concept.
i don't know if that is decoupled but at first glance it appears to me that its rise is due to its heavy focus on raw materials & other commodities which have done well this year.
